Calcium-dependent cell adhesion receptors, or cadherins, have been proposed to mediate synaptic target recognition and synaptogenesis in vertebrate brains. Previous studies have shown that the vertebrate protocadherin CNR (cadherin-related neuronal receptor) can expand their receptor repertoire by alternative splicing. We recently found that the Drosophila Ncad gene contains three exon modules, each of which is composed of a pair of highly similar but distinct exons, designated exons 7a/7b, exons 13a/13b, and exons 18a/18b. By combinatorial use of these alternative exons and another small exon, 7a?, the Ncad locus is capable of generating 12 isoforms, all of which share the same modular structure but have different sequences. We investigate the in vitro and in vivo functions of the Ncad molecular diversity. We have previsouly shown that Ncad regulates R7 target selection. To determine whether this function of Ncad requires the expression of multiple isoforms, we carried out transgene rescue experiments. We found that expressing a single Ncad isoform, including 7a-13a-18a, 7b-13a-18a, 7b-13b-18a, and 7b-13a-18b, substantially if not completely, rescues the Ncad phenotypes in R7 axons. We next examined whether the promiscuous in vivo function of the Ncad isoforms correlates with their adhesive activities. Using an S2 cell-aggregation assay, we determined the specificity of the heterophilic interactions mediated by Ncad isoforms. We found that all tested Ncad isoforms induced mixed-cell aggregates, indicating that they can mediate heterophilic interactions. However, the Ncad-expressing S2 cells did not intermix with the S2 cells expressing E-cadherin; instead, they formed separate cell aggregates. In summary, Ncad isoforms mediate type-specific but not isoform-specific heterophilic interactions. The lack of isoform-specificity, revealed by the transgene rescue and heterophilic interaction assays, argues against the hypothesis that the Ncad isoforms constitute an adhesion code to direct targeting specificity. Instead, we favor the idea that Ncad plays a permissive role in R7 layer-selection. What is the function of Ncad molecular diversity then? In vitro analysis of Ncad isoforms revealed that their adhesive activities differ in strength and not in specificity. All N-cadherin isoforms mediate homophilic interactions, but the isoforms encoded by exon 18b have a higher binding activity than those by the alternative exon, 18a. Exons 18a/b each encodes one and a half of EGF-CA repeats and one half of the transmembrane domain. Domain-swap experiments further revealed that the different sequences in the transmembrane domain among isoforms are responsible for their differential homophilic binding activity. Previous studies demonstrated that vertebrate classical cadherins first form cis-dimer before they form adhesive trans-tetramers. Our biochemistry study revealed that Ncad, like vertebrate cadherins, forms cis-dimer on cell surface. The exon 18b (but not 18a)-encoding transmembrane domain contains an AxxxG motif, which has been show, in ErbB1, to mediate homo-dimer formation of transmembrane domains. We speculate that the AxxxG motif in the exon18b-encoding Ncad isoforms serves to promote dimer-formation or to align Ncad in an orientation to facilitate trans-tetramer formation. To test whether Ncad alternative splicing is regulated developmentally, we developed a Tagman-based real-time PCR assay that can reliably measure the amounts of Ncad alternative transcripts. Using this assay system, we found that Ncad alternative splicing is temporally and spatially regulated during development. The general picture emerged from the studies in whole animals and isolated eye discs depicts that the exon 18a-encoding isoforms are prevalent in the adult stage while the other isoforms encoded by the exon18b are expressed primarily during development. Next, we examined the Ncad expression profiles in R3/4 and R7 photoreceptor neurons using a cell-sorting method. To our surprise, R3/4 and R7 neurons exhibit virtually identical expression profiles on exons 7a/b and 18a/b and a similar preference for exon 13a over 13b, indicating little difference between the expression profiles of the two distinct R-cell types. In summary, Ncad alternative splicing is regulated in a temporal, but not cell-type-specific, manner. Based on the dynamic regulation and the differential homophilic binding affinity, we speculate that the exon18b-encoding Ncad isoforms provides strong homophilic interactions between the axons during axon extension, while the exon18a-encoding isoforms mediates weak, but perhaps tunable, interactions between the growth cones and their targets.